Arab Nationalism, Producer Rift May Fuel Oil-Price Doubt -Study
Tuesday, Mar 06, 2012
LONDON (Dow Jones)--Democratization in the Middle-East and North Africa could fuel a nationalist backlash against foreign oil investors, while a growing split between Sunni and Shia Muslims may threaten cooperation between oil-producing nations, with both increasing uncertainty for oil prices, Chatham House said in a report Tuesday.
The authoritative U.K. think tank also said, however, that the need to generate more revenue in nations like Egypt and Libya, where authoritarian regimes were toppled last year, could also force governments to open up to foreign investors.
"There is a strong possibility that newly elected governments would be influenced by a nationalistic backlash among voters," Chatham House said.
Iraq, where regime change took place earlier, offers an early example; the new government opposed foreign ownership in oil fields and only allowed the signature of services contracts.
In addition, Chatham House said: "The Arab uprisings deepen divisions between Sunni and Shia regimes in the region," respectively led by Saudi Arabia and Iran, the two largest producers in the Organization of Petroleum Exporting Countries.
A "growing Sunni-Shia split within OPEC may threaten the management of the oil market in the event of downward pressure on prices if the global economy reverts to recession," it said, as members may not agree to coordinate production.
"There is much greater uncertainty [on oil prices in the medium term], depending on how the Arab uprisings develop and how their outcomes affect the behavior of governments and their relations with OPEC," the think tank said.
Still, the need to "provide more revenue" in a democratic environment "could open the upstream to foreign investment," Chatham House said. That "would help to prevent a major supply crunch," it said.
-By Benoit Faucon, Dow Jones Newswires; +44 77 601 777 36; Benoit.Faucon@dowjones.com
(END) Dow Jones Newswires
06-03-12 1725GMT
